August Futures Up More Than 40 Cents/Gallon From Their 4th Of July Lows

After a 1-day pullback, the rally has resumed for refined products as we await the latest FOMC announcement and the DOE weekly stats. 

Gasoline prices have now increased in 12 of the past 15 trading sessions, bringing August futures up more than 40 cents/gallon from their 4th of July lows.

ULSD prices managed to recover all of the early losses and finish with slight gains on the day, marking a 6th consecutive session of increases, with today making 7 if prices hold in the green. In addition to the bounce in futures we’ve seen some heavy buying in physical markets as well this week, with LA spot diesel hitting the highest basis values of the year, while Chicago ULSD has rallied to single digit discounts to ULSD futures after trading 30+ cents below earlier in the month.

The rally in refined products has pushed crack spreads to their highest levels since March, which is welcome news for refiners who have suddenly felt a bit of a reality check with supplies and margins returning to more normal levels in recent weeks. Then again, you have to be operating a refinery to enjoy the recent rally, and numerous unplanned outages – like this one in Memphis - have contributed to the move higher, so not everyone is celebrating.  

While refined products march higher, oil bulls aren’t quite ready to push prices north of $80, rallying to within a dime of that mark Tuesday before pulling back by more than $1/barrel. If the bulls can sustain a push above $80, there’s not much on the charts to stop a run at $90 in the back half of the year, with April’s high of $83.53 the only meaningful layer of prior resistance on the weekly chart. If we see oil prices fail to sustain this rally however, they will soon act as a major headwind to the rally in products given the extra refining capacity brought online around the world in the past year.

Speaking of which, it looks like the zombie refinery FKA Hovensa and Limetree bay may be given another chance to come back to life after a court ruled the EPA overstepped its authority (shocking) in requiring new permits before letting the new owners attempt to restart the facility. 

You can’t make this up:  protesters in Scotland concreted themselves to a road to block the country’s only refinery to protest its GHG emissions. Perhaps for their next trick the group will dump oil on the ground to protest the extreme amounts of CO2 released by concrete. 

The API reported builds in crude oil and diesel inventories of 1.3 and 1.6 million barrels respectively, while gasoline stocks dropped by 1 million barrels last week. The DOE’s weekly report is due out at its normal time this morning.

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